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Built to Sell: Creating a Business That Can Thrive Without You
According to John Warrillow, the number one mistake entrepreneurs make is to build a business that relies too heavily on them. Thus, when the time comes to sell, buyers aren't confident that the company-even if it's profitable-can stand on its own. To illustrate this, Warrillow introduces us to a fictional small business owner named Alex who is struggling to sell his advertising agency. Alex turns to Ted, an entrepreneur and old family friend, who encourages Alex to pursue three criteria to make his business sellable: * Teachable: focus on products and services that you can teach employees to deliver. * Valuable: avoid price wars by specialising in doing one thing better than anyone else. * Repeatable: generate recurring revenue by engineering products that customers have to repurchase often.
176 pages, Hardcover
First published February 1, 2010
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March 30, 2013
This easy-to-read book covers roughly the same ground as "The e-Myth" but has a bit more detail that made it more useful to me as I build process and turn my work into something that can live without me. I'm naturally cynical of these just so stories, but I like to have an arsenal of stories from which I can pick a technique to use at any point in time.
Here are the tips from the book, which is structured as "guru helps novice to get shit together and build business sustainably":
Here are the tips from the book, which is structured as "guru helps novice to get shit together and build business sustainably":
1. Don’t generalize; specialize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors.
2. Relying too heavily on one client is risky and will turn off potential buyers. Make sure that no one client makes up more than 15 percent of your revenue.
3. Owning a process makes it easier to pitch and puts you in control. Be clear about what you’re selling, and potential customers will be more likely to buy your product.
4. Don’t become synonymous with your company. If buyers aren’t confident that your business can run without you in charge, they won’t make their best offer.
5. Avoid the cash suck. Once you’ve standardized your service, charge up front or use progress billing to create a positive cash flow cycle.
6. Don’t be afraid to say no to projects. Prove that you’re serious about specialization by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you’ll get to people who need your product or service.
7. Take some time to figure out how many pipeline prospects will likely lead to sales. This number will become essential when you go to sell because it allows the buyer to estimate the size of the market opportunity.
8. Two sales reps are always better than one. Usually naturally competitive types, sales reps will try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep.
9. Hire people who are good at selling products, not services. These people will be better able to figure out how your product can meet a client’s needs rather than agreeing to customize your offering to fit what the client wants.
10. Ignore your profit-and-loss statement in the year you make the switch to a standardized offering even if it means you and your employees will have to forgo a bonus that year. As long as your cash flow remains consistent and strong, you’ll be back in the black in no time.
11. You need at least two years of financial statements reflecting your use of the standardized offering model before you sell your company.
12. Build a management team and offer them a long-term incentive plan that rewards their personal performance and loyalty.
13. Find an adviser for whom you will be neither their largest nor their smallest client. Make sure they know your industry.
14. Avoid an adviser who offers to broker a discussion with a single client. You want to ensure there is competition for your business and avoid being used as a pawn for your adviser to curry favor with his or her best client.
15. Think big. Write a three-year business plan that paints a picture of what is possible for your business. Remember, the company that acquires you will have more resources for you to accelerate your growth.
16. If you want to be a sellable, product-oriented business, you need to use the language of one. Change words like “clients” to “customers” and “firm” to “business.” Rid your Web site and customerfacing communications of any references that reveal you used to be a generic service business.
17. Don’t issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more installments only to those who stay so that you ensure your key staff stays on through the transition.
April 25, 2016
Here is what I got out of this book:
Step 1-4 focus on building value. 5-8 on selling the company.
1. Isolate a product with potential to scale.
- Specific offering. Not customizable.
- Develop a sales pitch for your product
2. Create a positive cash flow cycle
- Subscriptions
- Make sure no one customer makes up more than 15% of your revenue.
3. Hire a sales team
- Remove yourself from selling the product
- Hire 2 sales employees. They are competitive
“Your job as an entrepreneur is to hire salespeople to sell your products and services so you can spend your time selling your company.”
4. Stop selling everything else
“Business owners often believe that to be “customer centric,” they have to give customers whatever they want. But giving customers too much choice can be a detriment, especially if you’re trying to build a company you can scale and ultimately sell.”
- Customization kills scalability
- Lead your customers. Do not follow. Do not be afraid to end the business relationship if they don't like your standard product.
5. Launch a long term incentive plan for managers
- Prove your managers can run the company and will stick around. Not equity.
6. Find a broker
- Must be able to answer:
“Describe your sales cycle.”
“How many salespeople do you have?” “Describe your cash flow cycle.”
“Who are your customers?”
“How do you know if they are satisfied?”
“How often do they repurchase?”
7. Tell your management team
- Offer bonus when company sells
8. Convert offers to a binding deal
- Beware of earn-outs
Now for the hard part, putting these ideas into action.
Step 1-4 focus on building value. 5-8 on selling the company.
1. Isolate a product with potential to scale.
- Specific offering. Not customizable.
- Develop a sales pitch for your product
2. Create a positive cash flow cycle
- Subscriptions
- Make sure no one customer makes up more than 15% of your revenue.
3. Hire a sales team
- Remove yourself from selling the product
- Hire 2 sales employees. They are competitive
“Your job as an entrepreneur is to hire salespeople to sell your products and services so you can spend your time selling your company.”
4. Stop selling everything else
“Business owners often believe that to be “customer centric,” they have to give customers whatever they want. But giving customers too much choice can be a detriment, especially if you’re trying to build a company you can scale and ultimately sell.”
- Customization kills scalability
- Lead your customers. Do not follow. Do not be afraid to end the business relationship if they don't like your standard product.
5. Launch a long term incentive plan for managers
- Prove your managers can run the company and will stick around. Not equity.
6. Find a broker
- Must be able to answer:
“Describe your sales cycle.”
“How many salespeople do you have?” “Describe your cash flow cycle.”
“Who are your customers?”
“How do you know if they are satisfied?”
“How often do they repurchase?”
7. Tell your management team
- Offer bonus when company sells
8. Convert offers to a binding deal
- Beware of earn-outs
Now for the hard part, putting these ideas into action.
January 5, 2022
Really useful book set out as a case study of a business owner changing his business to make it less reliant on him and then selling it. Key points are all summarised which makes it easy to refer back to.
Don’t want to sell my business as I enjoy it too much but would like to reduce my own time needed on it so that I can do other things as well as work (like reading!).
Don’t want to sell my business as I enjoy it too much but would like to reduce my own time needed on it so that I can do other things as well as work (like reading!).
June 15, 2020
Provides an actionable framework on building business which are not dependent on their founders to grow and operate, thus making them highly sellable.
October 14, 2018
Автор объясняет простым языком владельцам малого бизнеса, как уйти от самозанятости и построить компанию, которую можно продать или привлечь в неё инвестора.
February 29, 2020
Must-read for most entrepreneurs and founders. The key takeaway is that you should build your business as if you're going to sell it, even if you have no intention to actually sell it. That's because a business that is sellable is usually a stronger and more enjoyable business in general.
Instead of a list of advice to follow, this book is written in the form of a story, where you follow around a fictional entrepreneur who is trying to transform his business into something that can be sold. Like most business books that try their hand at storytelling, the story leaves much to be desired: the plot isn't exciting, the characters are flat stereotypes, the dialogue sounds like an infomercial, and the writing is a bit awkward and mechanical. But despite all that, it ends up being an effective way to deliver the key insights in this book.
Here are some of those insights:
1. Specialize. Don't try to build a company that does a bit of everything. Instead, find a niche where you stand out, and dominate that one space. Aim to build a product company, where you become exceptionally good at repeatedly delivering a single product, rather than an agency, where you customize your product for every customer. Agencies have to do a bit of everything, which means they aren't particularly good at any one thing, and are often trying to do things they aren't qualified to do at all. By specializing, you are able to focus, and become the absolute best at one thing.
2. Don't be afraid to say no. Customers will always ask you to do things outside of your specialty and to customize your product for them. You must be brave enough to say no, even if that means turning business away. Remember that every time you say "no" to something custom and out of your wheel house, you will be able to "say" to something you're good at. Moreover, customers tend to have less respect for agencies and consultants—treating them like expendable labor, bullying them, blaming them for anything that goes wrong—whereas they may give you more respect if you say no and show them you're a focused product company.
3. Build a business that can run without you. Focus on building a machine that anyone who is reasonably qualified/trained can execute, rather than a company that relies on heroics that only you can deliver. A business that can't succeed without the owner is unsellable.
4. Build a predictable sales engine. You don't want every sale to be unique; you shouldn't be customizing the product for each customer; and you shouldn't rely on "hero selling" (e.g., only the founder or a very charismatic sales person can make sales). Instead, the goal is to create a repeatable sales engine. The first step is to create a repeatable sales process that is written down and can be trained to others. This will allow you to hire and train a sales team, rather than the founder doing all the sales. Once you have a sales team, you should hone the process until it's predictable: that is, you know that if you do X sales call per month, you'll get, on average, Y sales per month. If you can do that, you can then predictably scale the sales team and the entire company.
5. Tips for the acquisition process. The book has a number of detailed tips on not only building a sellable company, but also the acquisition process itself:
- If you're interested in being acquired, consider getting a firm that specializes in acquisitions to represent you. These firms can actively go out to find you buyers, present your company to them, and help you in negotiations. The firm should be small enough that your deal size is meaningful to them (e.g., if the firm makes billions per year and your company is worth only a few million, they probably won't spend much effort on you).
- There are different types of acquirers. For example, strategic buyers want to buy your company as part of a larger business initiative (e.g., your company may become a marketing channel that will boost the acquirer's core business); on the other hand, financial buyers want to buy your company to make money from it directly (e.g., by taking your profits). Strategic buyers are often willing to pay more, and are less concerned with profits, as they are really investing in what your company could help them accomplish in the future (so make sure to show the a vision of what they will be able to accomplish if they put their money into your business!), whereas financial buyers are just looking at what profit they can make right now (so make sure your financials are solid!). You can also break down buyers by those who are operators (they want to run and optimize the business) versus investment funds (who are willing to put in money, but otherwise are hands-off).
- Avoid earn-outs. That is, avoid an acquisition where a large portion of the payout for the owner must be earned by achieving certain metrics. This gives all the up-side to the acquiring company and all the risk to the owner. In most cases, these earn-outs fail, and the owner walks away with no company, and little money earned.
- Acquirers often put in non-binding offers, pending a due-diligence check. During this check, they also often ask for exclusivity. Due diligence can take a long time, be very invasive, and at the end, the acquirer may lower their offer or withdraw it entirely. Don't go into this process lightly!
- Recurring revenue typically leads to higher valuations. In order of increasing valuation: consumables (e.g., toothpaste); sunk-money consumables (e.g., razor blades for a specific handle or ink cartridges for a specific printer); subscriptions (e.g., magazines); sunk-money subscriptions (e.g., Bloomberg subscription for a Bloomberg terminal); auto renewal subscriptions (i.e., renews without customer having to explicitly do anything); contracts (e.g., phone contract).
- Offering employees stock can make the acquisition process more complicated. Instead of offering employees equity, the author recommends cash reward payouts (e.g., essentially bonuses, but with a vesting schedule) and stay bonuses (i.e., another bonus that vests if you stay some period of time after an acquisition). I'm not sure I agree with this advice, but the idea of cash bonuses with some sort of vesting was a new idea to me that's definitely worth considering!
Instead of a list of advice to follow, this book is written in the form of a story, where you follow around a fictional entrepreneur who is trying to transform his business into something that can be sold. Like most business books that try their hand at storytelling, the story leaves much to be desired: the plot isn't exciting, the characters are flat stereotypes, the dialogue sounds like an infomercial, and the writing is a bit awkward and mechanical. But despite all that, it ends up being an effective way to deliver the key insights in this book.
Here are some of those insights:
1. Specialize. Don't try to build a company that does a bit of everything. Instead, find a niche where you stand out, and dominate that one space. Aim to build a product company, where you become exceptionally good at repeatedly delivering a single product, rather than an agency, where you customize your product for every customer. Agencies have to do a bit of everything, which means they aren't particularly good at any one thing, and are often trying to do things they aren't qualified to do at all. By specializing, you are able to focus, and become the absolute best at one thing.
2. Don't be afraid to say no. Customers will always ask you to do things outside of your specialty and to customize your product for them. You must be brave enough to say no, even if that means turning business away. Remember that every time you say "no" to something custom and out of your wheel house, you will be able to "say" to something you're good at. Moreover, customers tend to have less respect for agencies and consultants—treating them like expendable labor, bullying them, blaming them for anything that goes wrong—whereas they may give you more respect if you say no and show them you're a focused product company.
3. Build a business that can run without you. Focus on building a machine that anyone who is reasonably qualified/trained can execute, rather than a company that relies on heroics that only you can deliver. A business that can't succeed without the owner is unsellable.
4. Build a predictable sales engine. You don't want every sale to be unique; you shouldn't be customizing the product for each customer; and you shouldn't rely on "hero selling" (e.g., only the founder or a very charismatic sales person can make sales). Instead, the goal is to create a repeatable sales engine. The first step is to create a repeatable sales process that is written down and can be trained to others. This will allow you to hire and train a sales team, rather than the founder doing all the sales. Once you have a sales team, you should hone the process until it's predictable: that is, you know that if you do X sales call per month, you'll get, on average, Y sales per month. If you can do that, you can then predictably scale the sales team and the entire company.
5. Tips for the acquisition process. The book has a number of detailed tips on not only building a sellable company, but also the acquisition process itself:
- If you're interested in being acquired, consider getting a firm that specializes in acquisitions to represent you. These firms can actively go out to find you buyers, present your company to them, and help you in negotiations. The firm should be small enough that your deal size is meaningful to them (e.g., if the firm makes billions per year and your company is worth only a few million, they probably won't spend much effort on you).
- There are different types of acquirers. For example, strategic buyers want to buy your company as part of a larger business initiative (e.g., your company may become a marketing channel that will boost the acquirer's core business); on the other hand, financial buyers want to buy your company to make money from it directly (e.g., by taking your profits). Strategic buyers are often willing to pay more, and are less concerned with profits, as they are really investing in what your company could help them accomplish in the future (so make sure to show the a vision of what they will be able to accomplish if they put their money into your business!), whereas financial buyers are just looking at what profit they can make right now (so make sure your financials are solid!). You can also break down buyers by those who are operators (they want to run and optimize the business) versus investment funds (who are willing to put in money, but otherwise are hands-off).
- Avoid earn-outs. That is, avoid an acquisition where a large portion of the payout for the owner must be earned by achieving certain metrics. This gives all the up-side to the acquiring company and all the risk to the owner. In most cases, these earn-outs fail, and the owner walks away with no company, and little money earned.
- Acquirers often put in non-binding offers, pending a due-diligence check. During this check, they also often ask for exclusivity. Due diligence can take a long time, be very invasive, and at the end, the acquirer may lower their offer or withdraw it entirely. Don't go into this process lightly!
- Recurring revenue typically leads to higher valuations. In order of increasing valuation: consumables (e.g., toothpaste); sunk-money consumables (e.g., razor blades for a specific handle or ink cartridges for a specific printer); subscriptions (e.g., magazines); sunk-money subscriptions (e.g., Bloomberg subscription for a Bloomberg terminal); auto renewal subscriptions (i.e., renews without customer having to explicitly do anything); contracts (e.g., phone contract).
- Offering employees stock can make the acquisition process more complicated. Instead of offering employees equity, the author recommends cash reward payouts (e.g., essentially bonuses, but with a vesting schedule) and stay bonuses (i.e., another bonus that vests if you stay some period of time after an acquisition). I'm not sure I agree with this advice, but the idea of cash bonuses with some sort of vesting was a new idea to me that's definitely worth considering!
December 31, 2020
Short, actionable, and written by a practitioner. (And so well written that the early chapters were difficult to read — anyone who has ever run a services business would immediately recognise the problems the protagonist faces in the opening narrative).
I also think it deserves especially high praise for articulating the ups and downs of the buyout process. You walk away feeling like you shared in the experience, which is fantastic.
I also think it deserves especially high praise for articulating the ups and downs of the buyout process. You walk away feeling like you shared in the experience, which is fantastic.
February 19, 2024
One of the better business books I’ve read!
Conveys learnings by way of a sort of parable, not an uncommon tactic. But I think it’s done well here.
Key takeaway is to make yourself redundant as much as possible. Sort of counterintuitive, especially given that as a lineman or companyman you want to do the opposite. I suppose that’s why a book like this is helpful to read.
Conveys learnings by way of a sort of parable, not an uncommon tactic. But I think it’s done well here.
Key takeaway is to make yourself redundant as much as possible. Sort of counterintuitive, especially given that as a lineman or companyman you want to do the opposite. I suppose that’s why a book like this is helpful to read.
December 25, 2020
10 жилийн өмнө туулсан алдааг минь хэлж өгөөд дээр яаж засахыг заагаад өгчиж. Буянтай ном бээ
May 10, 2023
Um livro fantástico que nos faz repensar modelos de negócio vencedores e quebrar muitas crenças. Enquanto proprietários de uma empresa, ao utilizar a metodologia indicada no livro ou ficamos com uma máquina previsível de receitas ou podemos pensar em vender a empresa para seguirmos com a vida que desejamos.
April 27, 2020
My Definition of A Business Is:
Something That Earns You A Lot of Money While You're Away or Even Asleep!
This Book Lays Down How To Exactly Do That.
I See Self Employed Folks Calling Themselves Businessmen. In Reality They're Actually Labouring Hours For Their Clients Day & Night.
Forget About Selling Your Company, If You're Too Involved With It's Operations Esp Sales.
This Book Teaches You How To Transition From A Self Employed To A Proper Businessman,
Able To Sell His Company To The Right Buyer.
A Very Dear Book To Me.
Something That Earns You A Lot of Money While You're Away or Even Asleep!
This Book Lays Down How To Exactly Do That.
I See Self Employed Folks Calling Themselves Businessmen. In Reality They're Actually Labouring Hours For Their Clients Day & Night.
Forget About Selling Your Company, If You're Too Involved With It's Operations Esp Sales.
This Book Teaches You How To Transition From A Self Employed To A Proper Businessman,
Able To Sell His Company To The Right Buyer.
A Very Dear Book To Me.
June 8, 2016
Must-read for every service-business owner
1. Easy to relate to, enjoyable storytelling
2. Clear step-by-step guide to turn a service into a replicable product
3. Inspiring, clear tips for any entrepreneur trying to turn his lifestyle business into a stand alone biz.
As an experienced entrepreneur who built and sold businesses in the past I regret I hadn't read the book a few years earlier.
1. Easy to relate to, enjoyable storytelling
2. Clear step-by-step guide to turn a service into a replicable product
3. Inspiring, clear tips for any entrepreneur trying to turn his lifestyle business into a stand alone biz.
As an experienced entrepreneur who built and sold businesses in the past I regret I hadn't read the book a few years earlier.
May 18, 2012
Amazing book. I was recommended to read this because it help shapes your head around what you are building in your business. Painful ( if you hate hearing I told you so ) to read if you are a business that is in the same industry as the writer, you feel his pain 100%. Really great lessons learned and makes the impossible seem possible. Well worth the time.
November 4, 2019
I’m positive this book is useful, for someone. But for me - it wasn’t. Hence the one star. I did like the story telling, them implementation guide and the points. However, it just went for me.
May 30, 2011
Ted's Tips:
1) Being a generalist forces you to hire generalist employees and your offering will be average at best. If you specialize, you can hire specialists and improve the quality of your work.
2) Make sure that no one client makes up more than 15 percent of your revenue.
3) Pitching a process you own puts you in control.
4) Make the business less dependent on you so you can reduce or avoid an earn out.
5) Once you've standardized your service, charge up front or use progress billing to create a positive cash flow cycle.
6) Prove that you're serious about specialization by turning down work that falls outside of your Standard Service Offering. The more people you say no to, the more referrals you'll get to people who do want your Standard Service Offering.
7) Generic, owner-dependent service businesses usually sell for no more than a small amount of cash up front and a 3-5 year earn out, which places all of the risk on the person selling the business and puts almost all of the potential rewards into the buyer's hands. You need to build a business where the majority of your proceeds get paid up front.
8) Track your conversion rate of pipeline prospects to sales as it will become essential for an acquirer to accurately estimate the size of the market opportunity.
9) Two sales reps are always better than one because they compete with each other and prove to a buyer that you have a scalable sales model (not just one good sales rep).
10) Hire people who are good at selling products, not services.
11) You can't be "kind of" a specialist. Either you specialize or you don't. Stop taking projects that fall outside of your Standard Service Offering.
12) Ignore your profit & loss statement in the year you make the switch to a Standard Service Offering and ensure that your partners and spouse are prepared to forgo a bonus in the year you make the switch. Make your cash flow statement your most important day-to-day management report in the year you make the switch.
13) You need at least two years of financial statements using the Standard Service Offering model before you sell your company.
14) Only use equity as a last resort for motivating and retaining your management team. Consider alternative forms of long-term incentive plans.
15) Find an advisor for whom you will be neither the largest nor the smallest client. Make sure they know your industry.
16) Avoid an advisor who offers to broker a discussion with a single client. You want to ensure there is competition for your business and avoid being used as a pawn for your advisor to curry favor with his or her best client.
17) Write a three-year business plan that paints a picture of what is possible for your business. Think big; remember that the company that acquires you will have more resources for you to accelerate your growth.
18) Stop using the language of a service firm and start using the language of a sellable business. Change words like clients to customers and firm to business. Rid your website and customer-facing communications of any references that reveal you used to be a generic service business.
19) Don't issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more installments only to those who stay so that you ensure your key staff stays on through the transition.
To transform a service firm into a sellable company, follow this 8-step process. Before you start the process, engage a good accountant with experience in helping entrepreneurs with succession planning. Depending on your tax jurisdiction, there will be tax planning strategies your accountant can put into place now that will minimize your tax bill when you sell your business. Do not wait until you have an offer to see an accountant. Timing is critical; get an accountant to devise a tax minimization strategy before you start the 8 steps.
Step 1: Create a Standard Service Offering
The first step in building a sellable company is to find a service your clients find valuable that you can teach someone else to perform. Brainstorm all of the services that you provide today and plot them on a simple diagram with "Teachable" on one axis and "Client Value" on the other.
Often, you'll find the most teachable services are the ones that clients value the least. That's normal. Alternatively, you'll probably find the services your clients value most are the least teachable. Work through all of the services you offer and eliminate services that a client needs to buy only once. Of the remaining services, pick the one that is plotted closest to the top right corner of the diagram above, which means that clients both value it as a service and you can teach it to someone to execute. This becomes the Standard Service Offering.
Sometimes you'll find that, by combining one or more services, you can create the ideal offering. Experiment with bundling a few services together to stake out the top right corner of the diagram.
Once you've isolated the service that clients value, need often, and is teachable, document your process for executing this type of project. You'll recall the conversation when Ted helped Alex to define and document the Five-Step Logo Design Process. Define each of the steps so that you can repeat the model in the same way each time.
Once you have a Standard Service Offering, write an instruction manual to deliver it. Make sure your instructions are specific enough for someone to follow independently by using examples and fill-in-the-blank templates where possible. Test your instructions by asking someone or a team to deliver that service without your involvement.
Getting the instruction manual done right will take time. Expect it to go through many drafts. Be patient.
Next, name your Standard Service Offering. Naming your offering gives you ownership of it and helps you differentiate from potential competitors. Once you are the owner of something unique, you move from offering a commoditized service to one where you decide the terms of its use. There's a market for whatever generic service you provide and you don't want customers comparing your price to others. Instead, name your offering and each of the steps you take to deliver it to differentiate the service so that you can set the price and payment terms.
Once you've named your Standard Service Offering and each of the steps, write a short description of the features and corresponding benefits of each step. Once you have the steps to your process and the corresponding copy, revamp all of your customer communications (e.g., website, brochure) to describe your process.
Step 2: Create a Positive Cash Flow Cycle
Next, create a positive cash flow cycle by charging up front for your Standard Service Offering. This will be possible if you branded your offering properly. Depending on your service, you may not be able to charge for the entire amount in advance, but you can try. You'll be surprised at how many clients agree. It's not unheard of to have clients pay $100,000 or more up front for a Standard Service Offering that is delivered over a year. If you charge up front, you will create a positive cash flow cycle, which will give you the cash you need to operate without diluting yourself with other shareholders. Acquiring companies will also give you a higher valuation when you sell your company because they will not have to commit as much of their own capital to your company.
Step 3: Hire a Sales Team
Once you have created, packaged, and started to charge for a Standard Service Offering, you need to remove yourself from selling it. If you have others delivering the service, but you're still the rainmaker, you will not be able to sell your businesses without a long and risky earn out. Instead, you need to hire salespeople. If you have done a good job packaging a consistent service, the best salespeople will be those used to selling a product. Look for salespeople like Angie Thacker who enjoy selling first and the product second. Avoid salespeople who come from professional services companies, as they will want to re-invent your service for every client.
If at all possible, hire at least two salespeople (not just one). Salespeople are competitive and an acquirer will want to see that you have a product that can be sold by salespeople in general and not just one superstar salesperson.
Step 4: Stop Accepting Other Projects
The next step is to stop taking on projects that fall outside of your Standard Service Offering. It's tempting to accept these projects because they bolster your revenue and cash flow. If you're charging up front for your service and your salespeople are selling it, then you shouldn't have to worry about cash flow. That leaves revenue as the reason to accept these projects that fall outside of your process. The revenue may feel good at first but it comes at an unacceptable cost: your team will lose focus; realizing that you're not serious about your process, clients will see a chink in your armor and start asking for customization of their projects; and you will need to hire other people to deliver. Most importantly, when you go to present your business to an acquirer, they will see the mixture of revenue from both your Standard Service Offering and project work and determine that you're just another service business.
I've had the opportunity to speak with hundreds of business owners who have made this transition and most have told me that clients who used to ask for custom services respect the change they made to their business model. Many clients actually buy more once the service is standardized. Clients are smart; they often know you're overreaching your capabilities in accepting assignments that fall outside of your sweet spot. In most cases, they will use you for these services because they know, like, and trust you. That doesn't mean you need to accept them.
Stopping yourself from accepting projects outside of your Standard Service Offering is the toughest part of the process of creating a sellable company. You will have employees testing your resolve and clients asking for exceptions, and you will second-guess yourself on more than one occasion. This is normal; you have to be strong on this and resist the temptation. There is a point where the wind will start blowing the other way and your clients, employees, and stakeholders will finally realize that you're serious about focusing on one thing. It takes time. It will happen, and when it does and you feel like the boat has actually shifted, you will have taken a giant step in creating a sellable company.
Once you have focused on a Standard Service Offering for which you will charge up front, and you have sales reps who are capable of selling and employees who are capable of delivering without your involvement, you need to create a two-year run of increasing business and financial performance. This is often frustrating for business owners who have made the decision to sell their business. Be patient and remember that these two years dramatically increase the cash you get up front for your business and minimize your reliance on an earn out.
Expect the year that you make the switch from accepting projects to focusing on your Standard Service Offering to be a bad financial year on paper. Your cash flow should be fine if you're charging up front but your accountant will need to change the way he or she recognizes revenue by spreading it out over the life of the delivery period of your Standard Service Offering. This has an effect of lowering your revenue in the current period and allowing you to go into future months with revenue on the books.
Spend two years driving the model as far and as fast as you can. Avoid the temptation to get personally involved in selling or delivering your Standard Service Offering. Instead, when you get asked for help, diagnose the problem and fix your system so the problem doesn't recur.
Many business owners realize a tremendous uptick in their quality of life in these two years. Business improves, cash flow grows, and client headaches decrease. In fact, many business owners like this stage so much, they shelve their plans to sell their company and decide to run it in perpetuity. If this happens to you, congratulations! If you still want to sell your business, continue on to the next step.
Step 5: Launch a Long-Term Incentive Plan for Managers
You need to prove to a buyer that you have a management team who can run the business after you're gone. What's more, you need to show that the management team is locked into staying with your company after acquisition.
Avoid using equity to retain key management as it will unnecessarily complicate the sale process. Instead, create a long-term incentive plan for your key managers. Each year, take an amount equivalent to their annual bonus and put it aside in a long-term incentive account earmarked for each manager you want to retain. Allow the manager to withdraw one third of the pool each year after a three-year period. That way, a good manager must always walk away from a significant amount of money should they decide to leave your company. You can go to www.BuiltToSell.com to find a template for a long-term incentive plan.
Step 6: Find a Broker
For those business owners who are committed to selling, the next step in the process is to find representation. If your company has less than $2 million in sales, a business broker will best serve you. If you have more than $2 million, in sales, a boutique mergers and acquisitions firm is probably your best bet. Look for a firm with experience in your industry, as they already know many of the potential buyers for your business. To find an M&A firm or business broker, ask other entrepreneurs you know who have sold their firm for a recommendation.
Make sure your broker appreciates what you have done to transform your business. If they continue to see you as the same as the commoditized service providers in your industry, move on. They need to appreciate that you have created something special and deserve to be compensated at a higher rate.
Once you have an M&A firm or broker engaged, they'll work with you to create The Book. This document describes your business and its performance to date along with a business plan for the future.
Your broker will typically charge a percentage of the proceeds of the deal in the form of a success fee.
Step 7: Tell Your Management Team
Your broker will set up management presentations for you and your team to meet with a prospective buyer. Telling your management team can be a daunting task. Think about it from their perspective and make sure there is something in it for them if the deal goes through. An acquisition can often mean significant career opportunities for your managers and that may be enough. Emphasize that, by being acquired, your managers will be more likely to hit the personal bonus targets, which will benefit them twice if you have created the long-term incentive plan as described in Step 5. You may also want to offer key employees a simple success bonus if a deal goes through. Offer to pay the success bonus in two installments, with one installment coming 60 days after the close and the other at some point in the future. An acquirer will like the fact that you put a deal-related incentive in place for your key employees to stay.
Step 8: Convert Offer(s) to a Binding Deal
Once you have completed your management presentations, you will hopefully get some offers in the form of a non-binding Letter of Intent. As you review it, keep in mind that your advisor will be trying to sell the benefits of the offer to you because: a) they'll get paid if the deal goes through; and b) they want to remind you of the hard work they have done to justify their fee.
This is normal and to be expected, but do not be swayed by it. Study the offer. It will likely contain an amount of money (or some other currency like stock) up front with another chunk tied to one or more performance targets for your business after the sale, which is often referred to as an earn out.
Treat the earn out portion as gravy. An earn out is simply a way for an acquirer to minimize their risk in buying your company. This means that you take most of the risk and they get most of the reward. Some earn outs have proven lucrative for the owners who accepted them. Most business owners who have sold a service business, however, have a nightmare story involving an overbearing parent company not delivering on what they promised in an earn out contract. As long as you get what you want for the business up front, and treat the earn out as gravy, you can walk away when things get nasty. If you feel like you have to stay to get full value for the business, then life will get uncomfortable for the duration of the earn out.
Keep in mind that the Letter of Intent is usually not a binding offer. Unless it includes a break-up fee (rare for smaller companies), they have every right to walk and you get nothing. Deals often fall through in the due diligence period, so don't be surprised if it happens to you.
The due diligence period usually lasts 60-90 days and a veteran entrepreneur I know likes to refer to it as the entrepreneur's "proctology exam." It isn't fun and the best strategy is often to just survive it. Due diligence can make you feel vulnerable and exposed. If the buyer is a professional, they will dispatch a team of MBA-types to your office who will quickly identify the weak spots in your model. That's their job. Try to keep your cool during this period. Try to present things in the best possible light but do not lie or hide the facts.
Once the due diligence period is over, there is a good chance that the offer in the Letter of Intent will be discounted. Again, don't be surprised if this happens to you. Expect it and you'll be pleasantly surprised if it doesn't happen. You'll need to go back to the math you did when reviewing the Letter in the first place. If the new discounted offer meets your target cash up front, then you can go ahead and agree. If the discounted offer falls below the threshold, walk away no matter how much the acquirer promises to help you hit your earn out.
If you accept the revised offer or the due diligence period ends, you'll have a closing meeting. Typically held at the acquirer's law firm, this is where the formalities are handled. You sign a lot of documents and, once the documents are signed, the law firm will move the cash portion of the sale from their account to yours. The deal is done.
1) Being a generalist forces you to hire generalist employees and your offering will be average at best. If you specialize, you can hire specialists and improve the quality of your work.
2) Make sure that no one client makes up more than 15 percent of your revenue.
3) Pitching a process you own puts you in control.
4) Make the business less dependent on you so you can reduce or avoid an earn out.
5) Once you've standardized your service, charge up front or use progress billing to create a positive cash flow cycle.
6) Prove that you're serious about specialization by turning down work that falls outside of your Standard Service Offering. The more people you say no to, the more referrals you'll get to people who do want your Standard Service Offering.
7) Generic, owner-dependent service businesses usually sell for no more than a small amount of cash up front and a 3-5 year earn out, which places all of the risk on the person selling the business and puts almost all of the potential rewards into the buyer's hands. You need to build a business where the majority of your proceeds get paid up front.
8) Track your conversion rate of pipeline prospects to sales as it will become essential for an acquirer to accurately estimate the size of the market opportunity.
9) Two sales reps are always better than one because they compete with each other and prove to a buyer that you have a scalable sales model (not just one good sales rep).
10) Hire people who are good at selling products, not services.
11) You can't be "kind of" a specialist. Either you specialize or you don't. Stop taking projects that fall outside of your Standard Service Offering.
12) Ignore your profit & loss statement in the year you make the switch to a Standard Service Offering and ensure that your partners and spouse are prepared to forgo a bonus in the year you make the switch. Make your cash flow statement your most important day-to-day management report in the year you make the switch.
13) You need at least two years of financial statements using the Standard Service Offering model before you sell your company.
14) Only use equity as a last resort for motivating and retaining your management team. Consider alternative forms of long-term incentive plans.
15) Find an advisor for whom you will be neither the largest nor the smallest client. Make sure they know your industry.
16) Avoid an advisor who offers to broker a discussion with a single client. You want to ensure there is competition for your business and avoid being used as a pawn for your advisor to curry favor with his or her best client.
17) Write a three-year business plan that paints a picture of what is possible for your business. Think big; remember that the company that acquires you will have more resources for you to accelerate your growth.
18) Stop using the language of a service firm and start using the language of a sellable business. Change words like clients to customers and firm to business. Rid your website and customer-facing communications of any references that reveal you used to be a generic service business.
19) Don't issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more installments only to those who stay so that you ensure your key staff stays on through the transition.
To transform a service firm into a sellable company, follow this 8-step process. Before you start the process, engage a good accountant with experience in helping entrepreneurs with succession planning. Depending on your tax jurisdiction, there will be tax planning strategies your accountant can put into place now that will minimize your tax bill when you sell your business. Do not wait until you have an offer to see an accountant. Timing is critical; get an accountant to devise a tax minimization strategy before you start the 8 steps.
Step 1: Create a Standard Service Offering
The first step in building a sellable company is to find a service your clients find valuable that you can teach someone else to perform. Brainstorm all of the services that you provide today and plot them on a simple diagram with "Teachable" on one axis and "Client Value" on the other.
Often, you'll find the most teachable services are the ones that clients value the least. That's normal. Alternatively, you'll probably find the services your clients value most are the least teachable. Work through all of the services you offer and eliminate services that a client needs to buy only once. Of the remaining services, pick the one that is plotted closest to the top right corner of the diagram above, which means that clients both value it as a service and you can teach it to someone to execute. This becomes the Standard Service Offering.
Sometimes you'll find that, by combining one or more services, you can create the ideal offering. Experiment with bundling a few services together to stake out the top right corner of the diagram.
Once you've isolated the service that clients value, need often, and is teachable, document your process for executing this type of project. You'll recall the conversation when Ted helped Alex to define and document the Five-Step Logo Design Process. Define each of the steps so that you can repeat the model in the same way each time.
Once you have a Standard Service Offering, write an instruction manual to deliver it. Make sure your instructions are specific enough for someone to follow independently by using examples and fill-in-the-blank templates where possible. Test your instructions by asking someone or a team to deliver that service without your involvement.
Getting the instruction manual done right will take time. Expect it to go through many drafts. Be patient.
Next, name your Standard Service Offering. Naming your offering gives you ownership of it and helps you differentiate from potential competitors. Once you are the owner of something unique, you move from offering a commoditized service to one where you decide the terms of its use. There's a market for whatever generic service you provide and you don't want customers comparing your price to others. Instead, name your offering and each of the steps you take to deliver it to differentiate the service so that you can set the price and payment terms.
Once you've named your Standard Service Offering and each of the steps, write a short description of the features and corresponding benefits of each step. Once you have the steps to your process and the corresponding copy, revamp all of your customer communications (e.g., website, brochure) to describe your process.
Step 2: Create a Positive Cash Flow Cycle
Next, create a positive cash flow cycle by charging up front for your Standard Service Offering. This will be possible if you branded your offering properly. Depending on your service, you may not be able to charge for the entire amount in advance, but you can try. You'll be surprised at how many clients agree. It's not unheard of to have clients pay $100,000 or more up front for a Standard Service Offering that is delivered over a year. If you charge up front, you will create a positive cash flow cycle, which will give you the cash you need to operate without diluting yourself with other shareholders. Acquiring companies will also give you a higher valuation when you sell your company because they will not have to commit as much of their own capital to your company.
Step 3: Hire a Sales Team
Once you have created, packaged, and started to charge for a Standard Service Offering, you need to remove yourself from selling it. If you have others delivering the service, but you're still the rainmaker, you will not be able to sell your businesses without a long and risky earn out. Instead, you need to hire salespeople. If you have done a good job packaging a consistent service, the best salespeople will be those used to selling a product. Look for salespeople like Angie Thacker who enjoy selling first and the product second. Avoid salespeople who come from professional services companies, as they will want to re-invent your service for every client.
If at all possible, hire at least two salespeople (not just one). Salespeople are competitive and an acquirer will want to see that you have a product that can be sold by salespeople in general and not just one superstar salesperson.
Step 4: Stop Accepting Other Projects
The next step is to stop taking on projects that fall outside of your Standard Service Offering. It's tempting to accept these projects because they bolster your revenue and cash flow. If you're charging up front for your service and your salespeople are selling it, then you shouldn't have to worry about cash flow. That leaves revenue as the reason to accept these projects that fall outside of your process. The revenue may feel good at first but it comes at an unacceptable cost: your team will lose focus; realizing that you're not serious about your process, clients will see a chink in your armor and start asking for customization of their projects; and you will need to hire other people to deliver. Most importantly, when you go to present your business to an acquirer, they will see the mixture of revenue from both your Standard Service Offering and project work and determine that you're just another service business.
I've had the opportunity to speak with hundreds of business owners who have made this transition and most have told me that clients who used to ask for custom services respect the change they made to their business model. Many clients actually buy more once the service is standardized. Clients are smart; they often know you're overreaching your capabilities in accepting assignments that fall outside of your sweet spot. In most cases, they will use you for these services because they know, like, and trust you. That doesn't mean you need to accept them.
Stopping yourself from accepting projects outside of your Standard Service Offering is the toughest part of the process of creating a sellable company. You will have employees testing your resolve and clients asking for exceptions, and you will second-guess yourself on more than one occasion. This is normal; you have to be strong on this and resist the temptation. There is a point where the wind will start blowing the other way and your clients, employees, and stakeholders will finally realize that you're serious about focusing on one thing. It takes time. It will happen, and when it does and you feel like the boat has actually shifted, you will have taken a giant step in creating a sellable company.
Once you have focused on a Standard Service Offering for which you will charge up front, and you have sales reps who are capable of selling and employees who are capable of delivering without your involvement, you need to create a two-year run of increasing business and financial performance. This is often frustrating for business owners who have made the decision to sell their business. Be patient and remember that these two years dramatically increase the cash you get up front for your business and minimize your reliance on an earn out.
Expect the year that you make the switch from accepting projects to focusing on your Standard Service Offering to be a bad financial year on paper. Your cash flow should be fine if you're charging up front but your accountant will need to change the way he or she recognizes revenue by spreading it out over the life of the delivery period of your Standard Service Offering. This has an effect of lowering your revenue in the current period and allowing you to go into future months with revenue on the books.
Spend two years driving the model as far and as fast as you can. Avoid the temptation to get personally involved in selling or delivering your Standard Service Offering. Instead, when you get asked for help, diagnose the problem and fix your system so the problem doesn't recur.
Many business owners realize a tremendous uptick in their quality of life in these two years. Business improves, cash flow grows, and client headaches decrease. In fact, many business owners like this stage so much, they shelve their plans to sell their company and decide to run it in perpetuity. If this happens to you, congratulations! If you still want to sell your business, continue on to the next step.
Step 5: Launch a Long-Term Incentive Plan for Managers
You need to prove to a buyer that you have a management team who can run the business after you're gone. What's more, you need to show that the management team is locked into staying with your company after acquisition.
Avoid using equity to retain key management as it will unnecessarily complicate the sale process. Instead, create a long-term incentive plan for your key managers. Each year, take an amount equivalent to their annual bonus and put it aside in a long-term incentive account earmarked for each manager you want to retain. Allow the manager to withdraw one third of the pool each year after a three-year period. That way, a good manager must always walk away from a significant amount of money should they decide to leave your company. You can go to www.BuiltToSell.com to find a template for a long-term incentive plan.
Step 6: Find a Broker
For those business owners who are committed to selling, the next step in the process is to find representation. If your company has less than $2 million in sales, a business broker will best serve you. If you have more than $2 million, in sales, a boutique mergers and acquisitions firm is probably your best bet. Look for a firm with experience in your industry, as they already know many of the potential buyers for your business. To find an M&A firm or business broker, ask other entrepreneurs you know who have sold their firm for a recommendation.
Make sure your broker appreciates what you have done to transform your business. If they continue to see you as the same as the commoditized service providers in your industry, move on. They need to appreciate that you have created something special and deserve to be compensated at a higher rate.
Once you have an M&A firm or broker engaged, they'll work with you to create The Book. This document describes your business and its performance to date along with a business plan for the future.
Your broker will typically charge a percentage of the proceeds of the deal in the form of a success fee.
Step 7: Tell Your Management Team
Your broker will set up management presentations for you and your team to meet with a prospective buyer. Telling your management team can be a daunting task. Think about it from their perspective and make sure there is something in it for them if the deal goes through. An acquisition can often mean significant career opportunities for your managers and that may be enough. Emphasize that, by being acquired, your managers will be more likely to hit the personal bonus targets, which will benefit them twice if you have created the long-term incentive plan as described in Step 5. You may also want to offer key employees a simple success bonus if a deal goes through. Offer to pay the success bonus in two installments, with one installment coming 60 days after the close and the other at some point in the future. An acquirer will like the fact that you put a deal-related incentive in place for your key employees to stay.
Step 8: Convert Offer(s) to a Binding Deal
Once you have completed your management presentations, you will hopefully get some offers in the form of a non-binding Letter of Intent. As you review it, keep in mind that your advisor will be trying to sell the benefits of the offer to you because: a) they'll get paid if the deal goes through; and b) they want to remind you of the hard work they have done to justify their fee.
This is normal and to be expected, but do not be swayed by it. Study the offer. It will likely contain an amount of money (or some other currency like stock) up front with another chunk tied to one or more performance targets for your business after the sale, which is often referred to as an earn out.
Treat the earn out portion as gravy. An earn out is simply a way for an acquirer to minimize their risk in buying your company. This means that you take most of the risk and they get most of the reward. Some earn outs have proven lucrative for the owners who accepted them. Most business owners who have sold a service business, however, have a nightmare story involving an overbearing parent company not delivering on what they promised in an earn out contract. As long as you get what you want for the business up front, and treat the earn out as gravy, you can walk away when things get nasty. If you feel like you have to stay to get full value for the business, then life will get uncomfortable for the duration of the earn out.
Keep in mind that the Letter of Intent is usually not a binding offer. Unless it includes a break-up fee (rare for smaller companies), they have every right to walk and you get nothing. Deals often fall through in the due diligence period, so don't be surprised if it happens to you.
The due diligence period usually lasts 60-90 days and a veteran entrepreneur I know likes to refer to it as the entrepreneur's "proctology exam." It isn't fun and the best strategy is often to just survive it. Due diligence can make you feel vulnerable and exposed. If the buyer is a professional, they will dispatch a team of MBA-types to your office who will quickly identify the weak spots in your model. That's their job. Try to keep your cool during this period. Try to present things in the best possible light but do not lie or hide the facts.
Once the due diligence period is over, there is a good chance that the offer in the Letter of Intent will be discounted. Again, don't be surprised if this happens to you. Expect it and you'll be pleasantly surprised if it doesn't happen. You'll need to go back to the math you did when reviewing the Letter in the first place. If the new discounted offer meets your target cash up front, then you can go ahead and agree. If the discounted offer falls below the threshold, walk away no matter how much the acquirer promises to help you hit your earn out.
If you accept the revised offer or the due diligence period ends, you'll have a closing meeting. Typically held at the acquirer's law firm, this is where the formalities are handled. You sign a lot of documents and, once the documents are signed, the law firm will move the cash portion of the sale from their account to yours. The deal is done.
May 21, 2022
My personal goal is for me and my collaborators to create a *sustainable* business, one that can be passed on to those who join it, rather than trying to shape it into something we could sell off at a high price; but many of the lessons do also apply if you're after plain sustainability.
This book is quite similar to The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, by Michael Gerber, which I read some years ago, but was worth reading. The author follows his own advice in that he focuses sharply on exactly the points he's trying to make, rather than trying to be everything to everybody. This, along with how he gives the information in story form, has enabled him to keep the book short and highly readable.
This book is quite similar to The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, by Michael Gerber, which I read some years ago, but was worth reading. The author follows his own advice in that he focuses sharply on exactly the points he's trying to make, rather than trying to be everything to everybody. This, along with how he gives the information in story form, has enabled him to keep the book short and highly readable.
January 23, 2023
It was a good actionable book. It contains an excellent thoughtframe for entrepeneurs looking to sell their business or just for them to better understand what makes a business sellable. It can also be read as a manual on how to get yourself out of the business and become an owner rather than a fire-extinguisher being needed all day. How do you create a replicable proces. The big drawback of the book is that it focusses on service businesses, yes it shows you how to “productize” your service and really hammers on repeat costumers but that just isn’t possible with -for example- high end design businesses. Where every process has a unique aspect and costumers don’t come back because one piece is enough for a lifetime in general.
January 24, 2024
Pleasantly surprised by this one. The author not only has a deep understanding of the topic, but also has distilled the key points well enough to present them in a very accessible way. The story format was a good choice, aiding recall of the system, and Warrillow spends an appropriate amount of time bringing it all together in the final section.
July 9, 2018
Bisneskirjan kohderyhmää pienyrittäjät, jotka haluavat vinkkejä firmansa myyntiin.Helposti kuunneltavaa ja kuvitteellisessa tarinamuodossa kerrottu nopeaa kulutettavaa. Kokonaisuus on kuitenkin liian yksinkertaistava. Toki en taida olla kohderyhmää :)
May 1, 2021
In 2017, I sold my last startup, as the story was unfolding, I could totally relate with the protagonist and his mentor. Nothing was exaggerated and everything was on point. It was great reminder of all the struggles I had to go through my startup journey. One of the best reads of 2021.
August 28, 2023
This should be a must read not only for enterpreneurs, but also for people that work in startups, accept stocks, or get invested into a company.
Often the end game for a startup is to be sold. This is a golden parachute for the founders, that use it to jump from the company. It is important to keep that in mind.
Often the end game for a startup is to be sold. This is a golden parachute for the founders, that use it to jump from the company. It is important to keep that in mind.
December 8, 2019
Interesting perspective on entrepreneurship and running a company. Good compelling story. Resonates with my challenges and current focus, even if I not consider to sell my company ;-)
May 27, 2019
An ideal book to rethink your business model.
July 9, 2023
Strongly recommend this book for building a business for sustainability and for scale.
November 20, 2020
So clear content on how to organize your business to avoid depends on you on daily operations.
April 11, 2021
If you plan to sell your company, this book is for you. If you don't, the first 60-70% is still extremely valuable, so that you can create a business that ... can thrive without you.
The aforementioned 60-70% part of the book says similar things that people can find in the E-Myth Revisited. The biggest difference is that the concepts are nicely packaged in a fictional story. In the story, Alex is a frustrated entrepreneur who wants to sell his dysfunctional business. He turns to an old family friend Ted to help him with the selling, realizing to his horror that his company is worthless and unsellable at that moment. His soon-to-be mentor family friend Ted personifies the author who gives him advice to slowly transform his business so that he can sell it in the end.
To me, the story format is much more digestible than the usual format of books like this, where the author states his observations or experiences, then expands on them so that the reader can accept and internalize it. A story just makes it much more readable and relatable. That's the reason why I was able to finish it in 2 days.
The aforementioned 60-70% part of the book says similar things that people can find in the E-Myth Revisited. The biggest difference is that the concepts are nicely packaged in a fictional story. In the story, Alex is a frustrated entrepreneur who wants to sell his dysfunctional business. He turns to an old family friend Ted to help him with the selling, realizing to his horror that his company is worthless and unsellable at that moment. His soon-to-be mentor family friend Ted personifies the author who gives him advice to slowly transform his business so that he can sell it in the end.
To me, the story format is much more digestible than the usual format of books like this, where the author states his observations or experiences, then expands on them so that the reader can accept and internalize it. A story just makes it much more readable and relatable. That's the reason why I was able to finish it in 2 days.
January 8, 2022
Excellent content with the perfect real story behind
December 30, 2020
One of the best books I've read this year. Very useful for anyone running a small company, regardless of whether they want to sell it or not. My main takeaways were:
1. If you run a service business that is highly dependent on a small group of important clients who want to deal personally with you — your business does not have a lot of worth . If you want to sell, the business has to work without the founders
2. Systemize and automate your process as much as you can, so that you can add value without spending a lot of time. Create a standardised offering, a consistent process for delivering it, and made sure that it is something the clients would need on a regular basis (recurring revenue)
3. Don’t accept too many different kinds of project and focus on a niche. If you just focus on one thing, you can hire specialists instead of generalists, who will be much better
4. Clients will always test your resolve. They are used to bossing their vendors, and will always ask for a customised solution. Stand your ground and don’t give in. Clients will never see you as serious about specialisation if you also accept other work
5. On hiring: Always hire at least 2 sales reps. Sales people are naturally competitive. Also, hire people who are good at selling products instead of services
1. If you run a service business that is highly dependent on a small group of important clients who want to deal personally with you — your business does not have a lot of worth . If you want to sell, the business has to work without the founders
2. Systemize and automate your process as much as you can, so that you can add value without spending a lot of time. Create a standardised offering, a consistent process for delivering it, and made sure that it is something the clients would need on a regular basis (recurring revenue)
3. Don’t accept too many different kinds of project and focus on a niche. If you just focus on one thing, you can hire specialists instead of generalists, who will be much better
4. Clients will always test your resolve. They are used to bossing their vendors, and will always ask for a customised solution. Stand your ground and don’t give in. Clients will never see you as serious about specialisation if you also accept other work
5. On hiring: Always hire at least 2 sales reps. Sales people are naturally competitive. Also, hire people who are good at selling products instead of services
March 13, 2021
An outstanding, engaging business book, presented in a very different way. Instead of presenting the subject matter in the form of technical mumbo-jumbo or lists and “laws,” the author creates a short story about a fictional business owner, who realizes that he wants to sell his business. Over the course of several weeks of mentorship meetings with an experienced entrepreneur and family friend, the protagonist identifies the hurdles in his way, and thanks to his mentor and determination, is able to surmount them - ultimately selling his business for a fat check.
I’d recommend this book to any business owner, especially to the solopreneur who is facing struggles growing their business, due to the ever-popular problem of being personally tied their clients. An illuminating read.
——
Even though it’s sometimes hard to imagine that you’ll want to leave the company you work so hard to build, there are many reasons for wanting to build a sellable business.
1) your company may be your best shot at a comfortable retirement.
2) you may want to start another business
3) you may want to sleep better at night knowing that you could sell your business if you wanted or needed to.
Make sure you can identify your vision for your product and how you differ from your competitors.
Specialize, don’t generalize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors. This is even more important, the smaller you are.
Relying too heavily on one client is risky and will turn off potential acquirers. Make sure no one client is responsible for more than 15% of your business.
Create a standard service offer and a consistent process of delivering the product or service. Make sure it’s something they the clients need an a regular basis, so you can count on revenue revenue (cash flow).
Have a process that you can repeat for all of your clients. Train your employees on that process so you don’t have to be the guy piecing every project together.
As long as you customize your approach to solving client problems, there is no scale to the business and it’s operations are constituent on people. When the people are the main assets or the business - and they can come and to every night - the business will not be worth very much.
Don’t become synonymous with your company. If buyers aren’t sure that your business will run without you, they won’t make their best off and you’ll definitely end up in some long, drawn-out earn out after/if you do sell, where anything can and will go wrong for you.
Products are paid for in advance. Services are paid for after. Do whatever you can to label yourself as a product business. Don’t use the word “client”, use the word “customer.”
Use the money they pay you in advance to cash flow what you need to deliver later. Example: magazines charge for one year upfront. They use the money to produce what you paid them for earlier.
Clients will never know that you are serious about specialization, and your repeatable system, until you start turning down work. It’s scary but you need to do it.
It’s much easier to market yourself if you’re known as, for example, “the country’s best logo creator,” and not “yet another good design firm.”
Great line for stubborn artistic types:
“Being creative is a great asset, but XXXX is a business. And as a business, our first priority is to make money. If you want to be an artist with free-reign, I suggest you find somewhere else to work.
- find something you’re good at
- make it repeatable process, free from customization
- teach your staff the process
- charge up front
- use that upfront cash to grow your business and deliver
Salespeople are competitive. Never hire one at a time. They’re gonna chill. Having multiple sales reps also helps prove to an acquirer that your business is properly scalable, free from the founder or one sales superstar.
Hire product salespeople and not service salespeople. People who are used to selling products don’t have the luxury to tailor make what they’re selling, and will focus on how what they’re selling benefits the customer (NOT CLIENT). It a client is given the choice, they will always ask you to customize for them.
Great line for breaking up or changing an agreement
- you’re a special client, which is why I wanted to tell you in person/personally deliver the news.
Align your management’s compensation with your own goals. Offer them one-time bonuses and long term incentives to stay. That’s not what equity is.
Find an adviser who you will be neither the largest nor their smallest client.
Avoid the adviser who works for one big client. He’s trying to use you as a pawn for his own benefit. Delivering you on a silver platter.
Extracting yourself from the epicenter of your operations is key.
Ambitious artists want to paint on a bigger canvas and capitalism rewards risk taking. It’s the business owner’s home that gets repossessed if sh*t hits the fan.
An acquirer wants to hear that you see a future for your business and you want their help to get you to the next level. They want to hear that you personally are going to stay on after the sale. Tell them that you are proud of what you’ve achieved and that you’d like to create some liquidity for the value that you’ve crated so far AND have an opportunity to participate in some of the future upside of the business. An acquirer needs to feel motivated, and to feel motivated they need to hear you’re genuinely keen on tapping into their resources to help you get to the next level.
- Implementation Guide
Many business owners find themselves trapped in an unsellable business. Customers ask to deal with the owner, the owner becomes personally involved in serving the customer, reinforcing the customer’s reliance on the owner, and the cycle continues. A business reliant on its owner is unsellable, so the owner is trapped in the business.
When choosing the product you want to scale, make sure it’s easily teachable to employees and something that your customers value, and not some quick job. Make sure they can keep coming back for more regularly (single most important factor in driving up revenue).
The more tightly locked in the client is to your offering, the faster your company will go up in value.
Name your product or service to help differentiate yourself from competitors. You can then dictate price and payment method.
The less your company costs to operate (working capital), the more money will go into your pockets when you are acquired. Understanding the terms of how the acquirer calculates the cost of working capital is very important.
“Your job as an entrepreneur is to hire salespeople to sell your products so you can spend your time selling your business.”
Avoid the temptation to be personally involved in delivering your standard offering. Instead, when you get asked for help, diagnose the problem and fix your system so the problem doesn’t recur.
Acquirers love to see that you have longterm contracts with customers. Give customers discounts in exchange, when you are getting ready to sell.
Reinforce your Blue Ocean:
- own the annual ranking study (RA POLL)
- own the awards ceremony (Gramies)
- own a big event (dc10)
I’d recommend this book to any business owner, especially to the solopreneur who is facing struggles growing their business, due to the ever-popular problem of being personally tied their clients. An illuminating read.
——
Even though it’s sometimes hard to imagine that you’ll want to leave the company you work so hard to build, there are many reasons for wanting to build a sellable business.
1) your company may be your best shot at a comfortable retirement.
2) you may want to start another business
3) you may want to sleep better at night knowing that you could sell your business if you wanted or needed to.
Make sure you can identify your vision for your product and how you differ from your competitors.
Specialize, don’t generalize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors. This is even more important, the smaller you are.
Relying too heavily on one client is risky and will turn off potential acquirers. Make sure no one client is responsible for more than 15% of your business.
Create a standard service offer and a consistent process of delivering the product or service. Make sure it’s something they the clients need an a regular basis, so you can count on revenue revenue (cash flow).
Have a process that you can repeat for all of your clients. Train your employees on that process so you don’t have to be the guy piecing every project together.
As long as you customize your approach to solving client problems, there is no scale to the business and it’s operations are constituent on people. When the people are the main assets or the business - and they can come and to every night - the business will not be worth very much.
Don’t become synonymous with your company. If buyers aren’t sure that your business will run without you, they won’t make their best off and you’ll definitely end up in some long, drawn-out earn out after/if you do sell, where anything can and will go wrong for you.
Products are paid for in advance. Services are paid for after. Do whatever you can to label yourself as a product business. Don’t use the word “client”, use the word “customer.”
Use the money they pay you in advance to cash flow what you need to deliver later. Example: magazines charge for one year upfront. They use the money to produce what you paid them for earlier.
Clients will never know that you are serious about specialization, and your repeatable system, until you start turning down work. It’s scary but you need to do it.
It’s much easier to market yourself if you’re known as, for example, “the country’s best logo creator,” and not “yet another good design firm.”
Great line for stubborn artistic types:
“Being creative is a great asset, but XXXX is a business. And as a business, our first priority is to make money. If you want to be an artist with free-reign, I suggest you find somewhere else to work.
- find something you’re good at
- make it repeatable process, free from customization
- teach your staff the process
- charge up front
- use that upfront cash to grow your business and deliver
Salespeople are competitive. Never hire one at a time. They’re gonna chill. Having multiple sales reps also helps prove to an acquirer that your business is properly scalable, free from the founder or one sales superstar.
Hire product salespeople and not service salespeople. People who are used to selling products don’t have the luxury to tailor make what they’re selling, and will focus on how what they’re selling benefits the customer (NOT CLIENT). It a client is given the choice, they will always ask you to customize for them.
Great line for breaking up or changing an agreement
- you’re a special client, which is why I wanted to tell you in person/personally deliver the news.
Align your management’s compensation with your own goals. Offer them one-time bonuses and long term incentives to stay. That’s not what equity is.
Find an adviser who you will be neither the largest nor their smallest client.
Avoid the adviser who works for one big client. He’s trying to use you as a pawn for his own benefit. Delivering you on a silver platter.
Extracting yourself from the epicenter of your operations is key.
Ambitious artists want to paint on a bigger canvas and capitalism rewards risk taking. It’s the business owner’s home that gets repossessed if sh*t hits the fan.
An acquirer wants to hear that you see a future for your business and you want their help to get you to the next level. They want to hear that you personally are going to stay on after the sale. Tell them that you are proud of what you’ve achieved and that you’d like to create some liquidity for the value that you’ve crated so far AND have an opportunity to participate in some of the future upside of the business. An acquirer needs to feel motivated, and to feel motivated they need to hear you’re genuinely keen on tapping into their resources to help you get to the next level.
- Implementation Guide
Many business owners find themselves trapped in an unsellable business. Customers ask to deal with the owner, the owner becomes personally involved in serving the customer, reinforcing the customer’s reliance on the owner, and the cycle continues. A business reliant on its owner is unsellable, so the owner is trapped in the business.
When choosing the product you want to scale, make sure it’s easily teachable to employees and something that your customers value, and not some quick job. Make sure they can keep coming back for more regularly (single most important factor in driving up revenue).
The more tightly locked in the client is to your offering, the faster your company will go up in value.
Name your product or service to help differentiate yourself from competitors. You can then dictate price and payment method.
The less your company costs to operate (working capital), the more money will go into your pockets when you are acquired. Understanding the terms of how the acquirer calculates the cost of working capital is very important.
“Your job as an entrepreneur is to hire salespeople to sell your products so you can spend your time selling your business.”
Avoid the temptation to be personally involved in delivering your standard offering. Instead, when you get asked for help, diagnose the problem and fix your system so the problem doesn’t recur.
Acquirers love to see that you have longterm contracts with customers. Give customers discounts in exchange, when you are getting ready to sell.
Reinforce your Blue Ocean:
- own the annual ranking study (RA POLL)
- own the awards ceremony (Gramies)
- own a big event (dc10)
August 1, 2021
Bleugh. I'm honestly so sick of business/development books that ruin their actual advice with shitty stories. This book has some real, actionable advice in it, but is almost unreadable. The book follows a fictional businessman trying to sell his marketing agency, and his conversations with a successful businessman who acts as his mentor. Warrillow states in the beginning that both characters are an amalgamation of the people he has met through his career. As a starting point, this is fantastic. Unlike many other business development books, Warrillow doesn't pretend that these are real conversations that just happen to paint him as an almighty guru, he acknowledges right off the bat that the whole story is just a narrative device to convey his advice.
Unfortunately, it takes a steep nose dive from there. The character's situations and conversations are so stiff and convenient that they are completely unbelievable. The following cycle repeats over and over:
1. Guru gives slightly cryptic advice
2. Businessman follows blindly after half-heartedly pushing back for 2 lines
3. Advice results in short-term chaos within the business, business tanks briefly
4. Businessman goes crying to guru
5. Guru says to "trust the plan" and reassures businessman
6. Guru's advice turns out to be solid, world hunger is solved, business is now worth $8 trillion.
Repeat ad nauseum.
Like almost every other business development book I've ever read, this entire thing can be summed up in a blog post or magazine article. I understand the need to elaborate in order to make money off of book sales, but this was just exhausting. My advice is to read the Cliff's notes in the goodreads review and save yourself the $10 and the migraine.
Unfortunately, it takes a steep nose dive from there. The character's situations and conversations are so stiff and convenient that they are completely unbelievable. The following cycle repeats over and over:
1. Guru gives slightly cryptic advice
2. Businessman follows blindly after half-heartedly pushing back for 2 lines
3. Advice results in short-term chaos within the business, business tanks briefly
4. Businessman goes crying to guru
5. Guru says to "trust the plan" and reassures businessman
6. Guru's advice turns out to be solid, world hunger is solved, business is now worth $8 trillion.
Repeat ad nauseum.
Like almost every other business development book I've ever read, this entire thing can be summed up in a blog post or magazine article. I understand the need to elaborate in order to make money off of book sales, but this was just exhausting. My advice is to read the Cliff's notes in the goodreads review and save yourself the $10 and the migraine.
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